TNT Express to Sell Airline Operations to Secure UPS Deal

The transaction is conditional on the completion of UPS’s
proposed 5.16 billion-euro ($6.58 billion) purchase of TNT, the
Hoofddorp, Netherlands-based the package-delivery company said
today in a statement. Financial terms were not disclosed.

TNT stock has been trading at a discount to UPS’s 9.50-
euro-a-share offer price as investor skepticism of the deal
grows. Since announcing the purchase on March 19, Atlanta-based
UPS has twice pushed back the target date to complete the
biggest acquisition in its 105-year history as the regulatory
review continues.

“This is an important step towards completion of the
proposed UPS-TNT Express merger and a positive outcome for the
airline employees,” Bernard Bot, interim Chief Executive
Officer of TNT Express, said in the statement.

TNT will sell 100 percent of TNT Airways and Pan Air Lineas
Areas SA to ASL, which operates 90 aircraft offering freight and
passenger services, the company said.

“This change of ownership and control will ensure service
continuity of the TNT Express operations after the completion of
the proposed merger,” the company said today in the statement
on its website.

Shares Rise

TNT stock jumped as much as 4 percent, the most since it
announced it was in takeover talks with UPS in February, and was
trading 1.5 percent higher at 7.07 euros as of 9:33 a.m. in
Amsterdam. That values the company at 3.8 billion euros.

The future of TNT’s air operations had been called into
question by the deal since companies from outside the European
Union may not hold stakes above 49 percent in airlines.

“It is definitely a short-term positive,” Zurich-based
Credit Agricole analyst Beat Keiser, who rates TNT Express
underperform, said by telephone. “It will be business as usual,
because of the guarantee they’ve given. There were probably a
few interested parties, but that they’ve found a buyer is
positive.”

Aside from the airline sale, UPS is seeking to avoid
concessions that would stymie its plan to double operations in
Europe with the acquisition of TNT. The American company
presented its case to European Commission officials in Brussels
on Nov. 12.

European Competition Commissioner Joaquin Almunia said that
the deal raises “serious competition concerns” in a Nov. 2
speech. The wording echoed remarks he made in January before the
collapse of Deutsche Boerse AG’s merger with NYSE Euronext.

UPS’s merger agreement requires it to make “best efforts”
to secure regulatory clearance and offer “reasonably
satisfactory” concessions. It will pay a breakup fee to TNT of
200 million euros if it pulls out.